Abstract
The minimum wage policy is expected to increase the wage level for low-wage group, reduce the poverty and narrow income inequality between high-wage group and low-wage group. Thus, the minimum wage implementation is an important labor policy in both developing and developed countries. Does the minimum wage policy have these effects in China? Chapter 7 analyzes the effects of minimum wage policy on wage levels and wage gap between the rural and urban registration groups in China and provides new evidence for the issue on the effects of minimum wage policy on labor market outcomes. It is found that even though the 1997 minimum wage policy implementation positively affects the wage for both rural and urban registration groups, the enforcement policies of both 2004 and 2008 minimum wage policies have not positively influences on the low-wage group, which may be caused by the minimum wage compliance problems in the private sector and the self-employed sector.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
For details on the CHNS, please refer to Chap. 2 of the book.
- 2.
In this chapter, based on the CHNS questionnaire for Hukou (rural and urban registrations), the rural group is defined as the workers with the rural registration, and the urban group is defined as the workers with the urban registration most of whom are local urban residents. The rural group includes the migrants who move from the rural region to urban region, and the workers who work in the rural regions with rural registration or without the permanent urban registration. Because the migrant sample from 1991 to 2011 is not enough for econometric analysis based on the DID (Difference in Difference) method, this chapter only focuses on the wage gap between the rural and the urban registration groups.
- 3.
- 4.
Regarding the debate on the minimum wage employment effect in the 1980s, it is indicated that there is a negative significant but modest −1% to −3% employment effect (Brown et al. 1982). After the 1990s, using cross-section data, Deere et al. (1995), Currie and Fallick (1996), Burkhauser et al. (2000), and Neumark and Wascher (1992, 2000, 2004) also found results consistent with the standard model prediction of a negative employment effect. On the other hand, using panel data to conduct quasi-natural experiment studies, Card (1992a, b), Katz and Krueger (1992), and Card and Krueger (1995a, b) pointed out that there are no unemployment effects. Similarly, there is no consensus on the effect of MW on employment.
- 5.
- 6.
For an empirical study on the effects of MW on gender wage gap in urban China, please see Li and Ma (2015).
- 7.
They compared minimum wage and the wage change rates from the prior year to the survey year, in addition to the ratios of the wage level to the minimum wage level in the prior year, and these variables and their interactions were utilized to employ the analysis.
- 8.
Li and Ma (2015) analyzed the effect of minimum wage on gender wage gap in China; they indicated that the minimum wage might reduce the gender wage gap in the long term.
- 9.
The survey regions are different from 1991 to 2011. For example, Liaoning is added in the 1997 survey; Beijing, Shanghai, and Chongqi are added in the 2011 survey. The observations in the common regions are utilized in the analyses based on the DID model.
- 10.
According to the Minimum Wage Article published in 1993, the main content of the MW consists of total earnings from work (except the overtime subsidy), any risk job allowance, and social security subsidy. I cannot obtain the detailed allowance and subsidy information from the CHNS survey data.
- 11.
Even though the minimum wage level includes the monthly minimum wage and hourly minimum wage, the former is for the regular worker, and the latter is for the irregular worker. Because the monthly minimum wages can be gained from 1993 to 2011 in these survey regions, whereas the hourly minimum wage information is lacking in some regions, the monthly minimum wage data are used. Thus the monthly wage is used in the analysis.
- 12.
Experience years = age − 6-years of schooling.
- 13.
Ownership types are composed of the government organizations, public organizations (Shiye Danwei), state-owned enterprises (SOE), collectively owned enterprises (COEs), private-owned enterprises/foreign owned enterprises, and others.
- 14.
Occupation is composed of technician, manager, clerk, agriculture worker, manufacturing worker (H), manufacturing worker (L), service worker, and others dummy variables. Based on the questionnaire of CHNS, manufacturing worker (H) is high-skilled manufacturing worker and manufacturing worker (L) is low-skilled manufacturing worker.
- 15.
Employment status is composed of worker, irregular worker I, irregular worker II, self-employed I, self-employed II, and others dummy variables Regular worker is the individual who works for another person or enterprise as permanent employee; irregular worker(I) is the contractor with other people or enterprise; irregular worker(II) is temporary worker; the self-employed (I) is self-employed, owner-manager with employees; the self-employed (II) is self-employed, independent operator with no employee; others is the paid family worker, unpaid family worker, and others.
References
Autor, D., Manning, A., & Smith, C. (2010). The contribution of the minimum wage to U.S. wage inequality over three decades: A reassessment. NBER Working Paper, No. 16533.
Baker, M., Benjamin, D., & Stanger, S. (1999). The highs and lows of the minimum wage effect: A time-series cross-section study of the Canadian law. Journal of Labor Economics, 17(2), 318–350.
Bhorat, H., Kanbur, R., & Stanwix, B. (2014). Estimating the impact of minimum wages on employment, wage, and non-wage benefits: The case of agriculture in South Africa. American Journal of Agriculture Economics, 96(5), 1402–1419.
Boeri, T. B., & Ours, J. (2013). The economics of imperfect labor markets. Princeton, NJ: Princeton University Press.
Brown, C. (1999). Minimum wages, employment, and the distribution of income. In Handbook of labor economics (Vol. 3). Cambridge, MA: Elsevier (Chapter 32).
Brown, C., Curtis, G., & Andrew, K. (1982). The effect of the minimum wage on employment and unemployment. Journal of Economic Literature, 20(2), 487–528.
Burkhauser, R. V., Kenneth, A., & Wittenburg, D. C. (2000). A reassessment of the new economics of the minimum wage. Journal of Labor Economics, 18(4), 653–681.
Card, D. (1992a). Using regional variation in wages to measure the effects of the federal minimum wage. Industrial and Labor Relations Review, 46(1), 22–37.
Card, D. (1992b). Do minimum wages reduce employment? A case study of California, 1987–89. Industrial and Labor Relations Review, 46(1), 38–54.
Card, D., & Krueger, A. (1995a). Myth and measurement: The new economics of the minimum wage. Princeton, NJ: Princeton University Press.
Card, D., & Krueger, A. (1995b). Time-series minimum wage studies: A meta-analysis. American Economic Review Papers and Proceedings, 85(2), 238–243.
Currie, J., & Fallick, B. (1996). The minimum wage and the employment of youth: Evidence from the NLSY. Journal of Human Resources, 31(2), 404–428.
Deere, D., Murph, K., & Welch, F. (1995). Employment and minimum wage hike. America Economic Review. Papers and Proceedings, 85, 232–237.
Di, J., & Han, Q. (2015). The income effects of minimum wage increase. Econometric and Technological Economic Research, 7, 90–103 (In Chinese).
DiNardo, J., Fortin, N. M., & Lemieux, T. (1996). Labor market institutions and the distribution of wages, 1973–1992: A semiparametric approach. Econometrica, 64(5), 1001–1044.
Dinkelman, T., & Ranchhod, V. (2012). Evidence on the impact of minimum wage laws in an informal sector: Domestic workers in South Africa. Journal of Development Economics, 99(1), 27–45.
Gindling, T. H., & Terrell, K. (2005). The effect of minimum wages on actual wages in formal and informal sectors in Costa Rica. World Development, 33(11), 1905–1921.
Grossman, J. B. (1983). The impact of the minimum wage on other wages. Journal of Human Resources, 18(3), 3–8.
Hohberg, M., & Lay, J. (2015). The impact of minimum wages on informal and formal labor market outcomes: Evidence from Indonesia. IZA Journal of Labor & Development, 4, 14.
Jia, P., & Zhang, S. (2013). Spillover effects of minimum wage increase. Statistical Research, 30(4), 37–41 (In Chinese).
Katz, L. F., & Krueger, A. B. (1992). The effect of the minimum wage on the fast food industry. Industrial and Labor Relations Review, 46(1), 6–21.
Koenker, R. W., & Bassett, G. J. (1978). Regression quantile. Econometrica, 46(1), 33–50.
Lee, D. (1999). Wage inequality in the United States during the 1980s: Rising dispersion or falling minimum wage? Quarterly Journal of Economics, 114(3), 977–1023.
Li, S., & Ma, X. (2015). Impact of minimum wage on gender wage gaps in urban China. IZA Journal of Labor and Development, 4, 20.
Li, S., Sato, H., & Sicular, T. (2013). The analysis of the changes of income distribution in China. The People’s Press (In Chinese).
Li, S., Sicular, T., & Gustafsson, B. (2008). Income distribution in China III. Beijing: Normal University Press (In Chinese).
Li, S., Yue, X., Sicular, T., & Sato, H. (2017). Latest change of income distribution situations in China: The research on Chinese income distribution V. Beijing: China Financial and Economic Press (In Chinese).
Ma, S., Zhang, J., & Zhu, X. (2012). The effect of minimum wage on average wage and employment. Economic Research, 5, 132–146 (In Chinese).
Machin, S., & Manning, A. (1997). Minimum wages and economic outcomes in Europe. European Economic Review, 41(3–5), 733–742.
Neumark, D. (2001). The employment effects of minimum wages: Evidence from a prespecified research design the employment effects of minimum wages. Industry Relation, 40(1), 121–144.
Neumark, D., Cunningham, W., & Siga, L. (2006). The Effects of the minimum wage in Brazil on the distribution of family incomes: 1996–2001. Journal of Development Economics, 80, 136–159.
Neumark, D., Schweitzer, M., & Wascher, W. (2004). Minimum wage effects throughout the wage distribution. The Journal of Human Resources, 39(2), 425–450.
Neumark, D., & Wascher, W. (1992). Employment effects of minimum and subminimum wages: Panel data on state minimum wage laws. Industrial and Labor Relations Review, 46(1), 55–81.
Neumark, D., & Wascher, W. (2000). The effect of New Jersey minimum wage increase on fast-food employment: A reevaluation using payroll records. The America Economic Review, 90(5), 1362–1396.
Neumark, D., & Wascher, W. (2004). Minimum wages, labor market institutions, and youth employment: A cross-national analysis. Industrial and Labor Relations Review, 57(2), 223–248.
Neumark, D., & Wascher, W. (2008). Minimum wages. Cambridge, MA: MIT Press.
Pettengill, J. S. (1981). The Long-run impact of a minimum wage on employment and the wage structure. In Report of the minimum wage study commission 6. Washington, DC: Government Printing Office.
Robinson, H. (2002). Wrong side of the track? The impact of the minimum wage on gender pay gaps in Britain. Oxford Bulletin of Economics and Statistics, 64(5), 417–448.
Robinson, H. (2005). Regional evidence on the effect of the national minimum wage on the gender pay gap. Regional Studies, 39(7), 855–875.
Wang, X., & Tang, X. (2014). Minimum wage impact on wages, work time, and income distribution of migrant workers. Presentation on the workshop of “Reforming Minimum Wage and Labor Regulation Policy in Developing and Transition Economies”, organized by China Institute for Income Distribution (CIID) BNU Business School (BS), October 18–19, 2014, Beijing, China.
Xing, C., & Xu, J. (2016). Regional variation of the minimum wages in China. IZA Journal of Labor & Development, 5, 8.
Ye, L., Gindling, T. H., & Li, S. (2015). Compliance with legal minimum wages and overtime pay regulation in China. IZA Journal of Labor & Development, 4, 16.
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2018 The Author(s)
About this chapter
Cite this chapter
Ma, X. (2018). Impact of Minimum Wage on Wage Distribution and Wage Gap Between Rural and Urban Registration Groups. In: Economic Transition and Labor Market Reform in China. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-13-1987-7_7
Download citation
DOI: https://doi.org/10.1007/978-981-13-1987-7_7
Published:
Publisher Name: Palgrave Macmillan, Singapore
Print ISBN: 978-981-13-1986-0
Online ISBN: 978-981-13-1987-7
eBook Packages: Economics and FinanceEconomics and Finance (R0)